PSI6.5.102 - Total Benefits On Retirement At Normal Retirement Age: Maximum Total Benefits – Pension Sharing on Divorce – Old Code Schemes

(This archived guidance relates to HMRC discretionary practice before the 6th April 2006. For current guidance on Registered Pension Schemes see the Registered Pension Schemes Manual)

The pension sharing on divorce provisions of the Welfare Reform and Pensions Act 1999 might apply to all types of retirement benefits scheme and not just those approved under Chapter I, Part XIV ICTA 88. Section 608 ICTA 88 allows continuing exemption from tax on the investment income, commissions, profits and gains of a pension fund approved under legislation in force before Finance Act 1970 (see Introduction 4.1-4.5) and which has not applied for approval under current legislation. This exemption is, however, subject to certain conditions. They are that:-

1. no contributions have been paid to the fund since 5 April 1980; and
2. no alterations have been made since 5 April 1980 to the terms on which benefits are payable.

[U95]

A fund altering or introducing provisions to effect to a pension sharing on divorce order might lose its continuing exemptions by virtue of 2. above. This is because

• the scheme member would give up some or all of his or her benefits (the pension debit)
• the ex-spouse of the scheme member would acquire benefits in his or her own right (a pension credit) which might be paid from the scheme (see PSI24.1.2).

With effect from 1 December 2000 the Inland Revenue revised an existing Extra Statutory Concession that applies to old funds subject to section 608 ICTA 88 (see PSI7.1.18 and PSI8.3.10). The revision allows for rule amendments to be made to such an old fund to give effect to a pension sharing order or provision mentioned in section 28(1) of the Welfare Reform and Pensions Act 1999 without losing tax exemptions under section 608 ICTA 88. Full details on the pension sharing on divorce conditions that apply for the purpose of the revision to the Extra Statutory Concession and a full text of the concession are in Pension Update 95, which was issued on 23 April 2001.